November 22, 2011

Public vs Private clouds (Again!)- it's not about the cost

As always I enjoyed reading Geva's throughts and for the most part comletely agree with him. The thing that caught my attention is Geva's point on private vs. public cloud. Geva re-iterated why the economical benefit of public cloud would turn private cloud into a small niche. Quoting Geva:

"Internal clouds will be niche. In the long-run, Internal Clouds (clouds operated in a company's own data centers, aka "private clouds") don't make sense. The economies of scale, specialization (an aspect of economies of scale, really) and outsourcing benefits of public clouds are so overwhelming that it will not make sense for any one company to operate its own data centers."

Last week I had an interesting discussion with Yoav Abrahami from Wix which made me rethink this entire argument. Wix runs their own managed data center on one of the hosters. They were able to build a pretty agile environment, which enables them to update their software a few times a day and in this way continually grow their business in this model. If they want extra capacity it takes them a couple of hours to get the hardware that they need. They pay a monthly fee and they don't need to commit to three years in advance for thier resources. The example of Wix is interesting as it doesn't fall exactly into the public cloud definition, yet they don't carry large part of a cost associated with the operation of a data center which makes the economical argument somewhat less relevant.

This brings me to the first point:

What makes a cloud private or public?

For most people, public cloud is synonymous with Amazon or Rackspace and private cloud is everything else. Which basically means that if you don't pay by the hour and can spawn x1000 of machines by a call of an API your not considered public cloud - is that really the right place to draw the line?

I beg to differ - the main thing that brought us to cloud in the first palce is agility at a reasonble cost. Agility in that context is our abiilty to launch new products, new features, and meet a growing demand continuously. Previously, it was the IT who stood in the way of the business and Cloud (public & private) emerged as a significantly better way to run IT. Wix is one good example of what some would consider a private cloud, but at the same time they were able to serve the agility and cost requirements of thier business. The thought that the only way to meet our business agility and cost would be through public cloud is wrong and there are many examples like Wix that prove otherwise. This brings me to the next point...

Its not about cost but ownership, and privacy.

The point in my previous argument is that the cost of running your own managed data center today can be fairly low and even lower than running on some of the known public clouds because you can optimize for a specific use case and workload. BeaTune (a referece from my previous post) is another good example in this regard. They claim that since they switched to HQ8 they were able to cut their infrastructure costs in half. Here are the exact numbers:

The explanation that I have for that, is that with public clouds you're limited in the type of compromises that you can make, and therefore carry a fairly large cost just to be able to live to the promise of meeting huge peak loads, a high degree of failures, and more. If you design for a specific work load you could come up with different structure that fits a potentially more relaxed set of assumptions that could fit your business better and can result in a lower cost and even better performance and SLA. The other part of the explanation is that there is more than one mean to gain from the economy of scale even in the case of private clouds such as leasing the resources of our infrastrcture and using hosted data centers. A good analogy to that is leasing versus renting a car. If we run a fleet we don't have to buy the cars of the entire fleet, instead, we could lease those cars from a third party provider which uses the economy of scale to manage the cost and risk through his entire customer base. By leasing the car we still maintain pretty much the same degree of control as we would if we would own the car ourselves, but we have a more economimcal model to do so.

This brings me to the main point of this post. The important difference between private and public cloud is less about the cost but more to do with ownership and flexibility. I'll use another transportation analogy to illustrate my point. The cost of using public transportation is significantly lower than owning our own private car. If I only use the cost argument I could easily argue that owning a private car doesn't make any economical sense, still most of us wouldn't give up our private car, not because it is less expensive, but because we want the flexibility, and to control when and where we want to go, and are willing to pay extra to accommodate these needs. Pubic cloud in this example is analogous to public transportation; the fact that you can share the same infrastructure with many users enables the sharing of costs with all the users, and thus the cost per user is significantly reduced, while at the same time it means that you agree to compromise on some sort of a least common denominator which is also an attribute of that cost benefit.

If we agree on this observation, then its clear that niether private nor public clouds would ever go away but instead we'll be moving away from the old way of running data centers into a more modern data center, a hybrid data ceneter that can serve the need for control and cost. In both cases, controlling the cooling, real estate, and electiricity doesn't makes any sense, and indeed all that will be outsourced completely if that's not already the case. The main thing that will make private cloud different is who controls where and how our data is maintained, where and how our services will run, what type of infrastrcture (compute, network, storage) we choose to run our business, and most importantly how much we're willing to share that environment with other users to reduce the cost. Even with that, it's hard to draw a clear line between private and public cloud, as it may very well be the case that what's right in a particular case is a mashup between the two. For example, imagine the case where we will keep our data in a private cloud but run the compute nodes on a public cloud, is that a private, public cloud...who cares?

Final note

Many use the term private cloud to point to the old (and pretty clueless) way of running a data center. I argued that private cloud, as the name suggests, represents a business need to maintain high degree of privacy and control of its data and resources by ensuring that they are not shared with others. The key is the sharing aspect. The resources may very well be hosted somwhere else but the key is that they remain private. These needs will never cease to exist in the same way that we have public and private transportation, or the option to lease and rent a car, and will continue to have. The old way of running data centers must change and is changing to meet the cost and agility demand of the business, and is adopting many of the features of public cloud. With that the cost margin differences between private and public clouds becomes less signficant and for some scenarios has proven to be even cheaper (assuming that you can design for a particular work load and use case) in a private cloud sceanrio. All this makes the cost argument even less significant a factor for choosing between the two models.

Public cloud providers would also need to adapt to meet the demand of private cloud. Rackspace recently announced a new offering in that space around OpenStack.

Rackspace's announcement is another sign that any player that wants to compete in the IaaS market needs to offer some way to have a private and public cloud. Any offering with only half that is going to be left wanting.

In addition to that, Rackspace is conneting their hosting business which some could view as another form of private cloud with their public cloud offering which will give thier customers an even greater degree of flexability. Amazon already provides for a while now the Virtual Private Cloud (VPC) service which enables them to offer resources from the public cloud as just another node in the customer's private cloud. Amazon VPC doesn't provide the full degree of privacy and isolation of their network and resources, but is definitely another form of connecting private with public cloud offerings, and an indication of how Amazon has adapted to this demand. There are still many questions to be answered and challenges ahead, namely how to combine the two models well both technically and echonomically, but the main point is that the entire debate around private and public cloud, who's going to win should become moot. It's now time to focus our energy on how we combine the two.

Comments

As always I enjoyed reading Geva's throughts and for the most part comletely agree with him. The thing that caught my attention is Geva's point on private vs. public cloud. Geva re-iterated why the economical benefit of public cloud would turn private cloud into a small niche. Quoting Geva:

"Internal clouds will be niche. In the long-run, Internal Clouds (clouds operated in a company's own data centers, aka "private clouds") don't make sense. The economies of scale, specialization (an aspect of economies of scale, really) and outsourcing benefits of public clouds are so overwhelming that it will not make sense for any one company to operate its own data centers."

Last week I had an interesting discussion with Yoav Abrahami from Wix which made me rethink this entire argument. Wix runs their own managed data center on one of the hosters. They were able to build a pretty agile environment, which enables them to update their software a few times a day and in this way continually grow their business in this model. If they want extra capacity it takes them a couple of hours to get the hardware that they need. They pay a monthly fee and they don't need to commit to three years in advance for thier resources. The example of Wix is interesting as it doesn't fall exactly into the public cloud definition, yet they don't carry large part of a cost associated with the operation of a data center which makes the economical argument somewhat less relevant.

This brings me to the first point:

What makes a cloud private or public?

For most people, public cloud is synonymous with Amazon or Rackspace and private cloud is everything else. Which basically means that if you don't pay by the hour and can spawn x1000 of machines by a call of an API your not considered public cloud - is that really the right place to draw the line?

I beg to differ - the main thing that brought us to cloud in the first palce is agility at a reasonble cost. Agility in that context is our abiilty to launch new products, new features, and meet a growing demand continuously. Previously, it was the IT who stood in the way of the business and Cloud (public & private) emerged as a significantly better way to run IT. Wix is one good example of what some would consider a private cloud, but at the same time they were able to serve the agility and cost requirements of thier business. The thought that the only way to meet our business agility and cost would be through public cloud is wrong and there are many examples like Wix that prove otherwise. This brings me to the next point...

Its not about cost but ownership, and privacy.

The point in my previous argument is that the cost of running your own managed data center today can be fairly low and even lower than running on some of the known public clouds because you can optimize for a specific use case and workload. BeaTune (a referece from my previous post) is another good example in this regard. They claim that since they switched to HQ8 they were able to cut their infrastructure costs in half. Here are the exact numbers:

The explanation that I have for that, is that with public clouds you're limited in the type of compromises that you can make, and therefore carry a fairly large cost just to be able to live to the promise of meeting huge peak loads, a high degree of failures, and more. If you design for a specific work load you could come up with different structure that fits a potentially more relaxed set of assumptions that could fit your business better and can result in a lower cost and even better performance and SLA. The other part of the explanation is that there is more than one mean to gain from the economy of scale even in the case of private clouds such as leasing the resources of our infrastrcture and using hosted data centers. A good analogy to that is leasing versus renting a car. If we run a fleet we don't have to buy the cars of the entire fleet, instead, we could lease those cars from a third party provider which uses the economy of scale to manage the cost and risk through his entire customer base. By leasing the car we still maintain pretty much the same degree of control as we would if we would own the car ourselves, but we have a more economimcal model to do so.

This brings me to the main point of this post. The important difference between private and public cloud is less about the cost but more to do with ownership and flexibility. I'll use another transportation analogy to illustrate my point. The cost of using public transportation is significantly lower than owning our own private car. If I only use the cost argument I could easily argue that owning a private car doesn't make any economical sense, still most of us wouldn't give up our private car, not because it is less expensive, but because we want the flexibility, and to control when and where we want to go, and are willing to pay extra to accommodate these needs. Pubic cloud in this example is analogous to public transportation; the fact that you can share the same infrastructure with many users enables the sharing of costs with all the users, and thus the cost per user is significantly reduced, while at the same time it means that you agree to compromise on some sort of a least common denominator which is also an attribute of that cost benefit.

If we agree on this observation, then its clear that niether private nor public clouds would ever go away but instead we'll be moving away from the old way of running data centers into a more modern data center, a hybrid data ceneter that can serve the need for control and cost. In both cases, controlling the cooling, real estate, and electiricity doesn't makes any sense, and indeed all that will be outsourced completely if that's not already the case. The main thing that will make private cloud different is who controls where and how our data is maintained, where and how our services will run, what type of infrastrcture (compute, network, storage) we choose to run our business, and most importantly how much we're willing to share that environment with other users to reduce the cost. Even with that, it's hard to draw a clear line between private and public cloud, as it may very well be the case that what's right in a particular case is a mashup between the two. For example, imagine the case where we will keep our data in a private cloud but run the compute nodes on a public cloud, is that a private, public cloud...who cares?

Final note

Many use the term private cloud to point to the old (and pretty clueless) way of running a data center. I argued that private cloud, as the name suggests, represents a business need to maintain high degree of privacy and control of its data and resources by ensuring that they are not shared with others. The key is the sharing aspect. The resources may very well be hosted somwhere else but the key is that they remain private. These needs will never cease to exist in the same way that we have public and private transportation, or the option to lease and rent a car, and will continue to have. The old way of running data centers must change and is changing to meet the cost and agility demand of the business, and is adopting many of the features of public cloud. With that the cost margin differences between private and public clouds becomes less signficant and for some scenarios has proven to be even cheaper (assuming that you can design for a particular work load and use case) in a private cloud sceanrio. All this makes the cost argument even less significant a factor for choosing between the two models.

Public cloud providers would also need to adapt to meet the demand of private cloud. Rackspace recently announced a new offering in that space around OpenStack.

Rackspace's announcement is another sign that any player that wants to compete in the IaaS market needs to offer some way to have a private and public cloud. Any offering with only half that is going to be left wanting.

In addition to that, Rackspace is conneting their hosting business which some could view as another form of private cloud with their public cloud offering which will give thier customers an even greater degree of flexability. Amazon already provides for a while now the Virtual Private Cloud (VPC) service which enables them to offer resources from the public cloud as just another node in the customer's private cloud. Amazon VPC doesn't provide the full degree of privacy and isolation of their network and resources, but is definitely another form of connecting private with public cloud offerings, and an indication of how Amazon has adapted to this demand. There are still many questions to be answered and challenges ahead, namely how to combine the two models well both technically and echonomically, but the main point is that the entire debate around private and public cloud, who's going to win should become moot. It's now time to focus our energy on how we combine the two.